Robot Autopsy
Cozmo is dead.
Anki, the maker of Cozmo, has shut down.[1] Anki raised >$200M and had probably about the same in revenue, so its closing is a bit of a surprise to some.
Of course, Jibo is dead. And Sphero has moved away from toys (particularly all its licensed toys) and is making a run at robotics/education.
So, what happened?
The toy market is brutal.
The toy business is primarily two segments: stuff under $40 and apps. A Mattel executive once told me, “our business is cheap plastic.” Of course, apps are under $40 too.
There are exceptions, and many of those exceptions sell to adults (in the toy world, ‘adult’ effectively includes 15-year-olds). But generally, if it’s over $40, it’s not going to sell in profitable quantities.
Pricing & Market Signals
Price tends to correlate with perceived luxury or perceived utility (or both). The higher the price, the greater the perceived luxury or utility needs to be — you’re signaling luxury or utility with a high price — and signaling more luxury and more utility with the degree to which your price is higher than comparables. It’s a promise. You gotta deliver.
The problem with these robots is that they were often priced at utility/luxury level but offered neither. Jibo had a MSRP of $900[2] and was intended to be useful but effectively offered nothing beyond any other smart speaker. The robots aimed at the toy market all broke the $40 rule, which meant they were aiming at a niche market the entire time.
I’ve done strategy work for toy companies and the basic toy-design instructions are make it exciting and make it cost $10 to manufacture. Maybe it’ll sell for $20 or $30 and have a shot at 100,000+ units. That’s usually the minimum bar.
The make it exciting component is what all these companies missed. In the toy industry, it’s referred to as the “play narrative,” which can be a more useful way to think of UX because ‘narrative’ implies an ongoing, fulfilling interaction of increasingly unfolding experiences. (For some UXs, such as in banking, you just want to accomplish something — you don’t want the interaction to be ‘ongoing.’)
If you run through the play narrative for any of these robots, you reach the end rather quickly — within an hour or a day. Spin Master’s Hatchimals has a much more robust narrative, and that’s probably why it’s a $4B company and Anki is closing.
Amazon’s Alexa doesn’t have a robust play narrative but it’s gadget priced (e.g. no perceived luxury or utility required), and it occupied the most valuable real estate on the internet (Amazon’s home page). (Gadget pricing, largely targeted at adult men, is a little above $40 toy pricing; note how Apple’s smart speaker is far above gadget pricing … and it doesn’t sell. Apple always aims for luxury….)
Pricing & Play Narrative
The toy and gadget markets are mostly price-defined (literally — the starting point for most toy design is the target retail price … you work back from that). If you’re outside of market pricing in those categories, you’re probably in a niche at best.
Luxury pricing requires perceived luxury or utility. Just read the Jibo reviews to appreciate that people thought this was a robot of very limited utility. (And by utility, I mean something more than a can-opener. Unless you’re making can-openers.)
If you have a product that can have a play narrative (toy or not), then it’s an incredibly useful way to think about user interaction. It suggests building a relationship with the product, integrating into the user’s life (or mind), and creating an ongoing fulfillment from use. That’s the sort of feature-set that drives word-of-mouth, upsells and add-ons, and provides for pricing leverage (against commodification). The play narrative concept works across toys but also across most ed-tech and in many other fields … so ask your UX person “what’s the play narrative?” and you should get a series of choose-your-own-adventuresque stories. Nailing the choose-your-own-adventures can often make or break a product.
And if you don’t have a play narrative, then your robot better be industrial. (Of course, in that case you have a use narrative.)
I have no idea what happened to all of Anki’s cash. I can only imagine that they were selling Cozmo at a substantial loss. I’d guess they manufactured in China to achieve some margin. Of course, all that margin was wiped out by operating out of San Francisco. So you’ve gained 20% by manufacturing in China but lose more than that by headquartering in San Francisco? Sounds to me like you didn’t realize you were in a business of tight margins. The magazine business is also one of tight margins, and the most successful magazine company is Meredith. They’re in Iowa.
About Nathan Allen
Formerly of Xio Research, an A.I. appliance company. Previously a strategy and development leader at IBM Watson. His views do not necessarily reflect anyone’s, including his own. (What.) Nathan’s academic training is in intellectual history; his next book, Weapon of Choice, examines the creation of American identity and modern Western power. Don’t get too excited, Weapon of Choice isn’t about wars but rather more about the seeming ex nihilo development of individual agency … which doesn’t really seem sexy until you consider that individual agency covers everything from voting rights to the cash in your wallet to the reason mass communication even makes sense….
